Skip to main content

Homebuyer's Rose-Colored Glasses Seeing Too Much Green on Their New Purchase

Oct 28, 2011

Despite widespread volatility within the housing market and five consecutive years of home value declines, more than two in five (42 percent) of polled prospective homebuyers believe home values typically appreciate by seven percent a year, according to a recent survey by Zillow. This is an unrealistic expectation as, historically, home values in a normal market tend to appreciate by two to five percent annually. Zillow, with Ipsos, surveyed prospective homebuyers, asking basic questions about the homebuying process. Despite the unrealistic expectations about home value appreciation, prospective homebuyer respondents seem fairly knowledgeable about the homebuying process, answering questions correctly more than half the time (65 percent). However, several important parts of the process confused them. Two in five (41 percent) buyers think they are required to buy private mortgage insurance (PMI) regardless of the amount of their downpayment.   Additionally, more than half of prospective homebuyers who were polled confuse appraisals and inspections. Fifty-six percent said the purpose of an appraisal was to determine if the home is in good condition, when in fact that is the purpose of an inspection. "It's troubling that we're still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation," said Dr. Stan Humphries, chief economist at Zillow. "It's great that buyers seem to have a fairly solid grasp of the home-buying process, but since this is one of the biggest financial decisions of most people's lives, it's even more important that they understand how that investment will appreciate after they sign the papers. Over-estimation of the appreciation potential will lead many to buy real estate when the time in which they plan to live in the house may make renting a better strategy." Additional findings in the survey include: ►More than one-third (37 percent) of respondents believe buying homeowner's insurance is optional.   ►Nearly half of those polled do not understand when they will actually own the home they intend to buy. Forty-seven percent said a prospective buyer owns a home after the purchase contract is signed. The purchase and sales agreement merely kicks off the closing phase, which can be a lengthy process. ►The majority (87 percent) of those polled know that closing costs are negotiable and can vary by bank and lender. Lender fees, like loan origination fees, administrative costs and other clerical fees, are typically the most negotiable in the homebuying process.
About the author
Published
Oct 28, 2011
Co-Founder Mat Grella Terminated From NEXA

NEXA CEO Kortas states negotiations regarding the buyout will continue.

Mar 27, 2024
Comings And Goings At AmeriHome

Chief Operating Officer John Hedlund announced his retirement on Thursday in a LinkedIn post.

Mar 22, 2024
Rocket's Tim Birkmeier To Retire

Birkmeier is bidding farewell after a 28-year career at Rocket Companies.

Mar 21, 2024
How NAR’s Settlement Impacts Homebuying

While the settlement's silver lining is that homes are expected to become more affordable, many uncertainties loom over the housing market.

Mar 19, 2024
NAR Reaches $418 Million Settlement

The association agreed to give home sellers the option of compensating agents.

Mar 15, 2024
U.S. Non-Bank Mortgage Lenders Surge Amid Industry Consolidation, Fitch Ratings Reports

As smaller players exit the market, scaled originators like UWM and PennyMac Financial dominate, but challenges persist with low origination volume and pressured margins amidst rising interest rates.

Mar 14, 2024